Some of the 20 blocks up for auction in China's second shale gas tender next month may be shunned by bidders due to their limited potential for development, according to an industry expert with the Ministry of Land and Resources (MLR).

Most of the blocks can be categorized as "acceptable," while many are "not good at all", said the source on condition of anonymity due to the sensitivity of the comments.

Some of the blocks have not been thoroughly surveyed, the source said on the sidelines of an industry conference in Beijing, echoing previous comments from other industry experts. Winning bidders will need to evaluate the blocks themselves as the MLR has only assessed them on a preliminary basis, Professor Zhang Jinchuan with the China University of Geosciences told Interfax last week.

The MLR expert cited Chongqing Municipality as an example of the uneven quality of the blocks on offer. Of the three blocks available in Chongqing, the Qianjiang and Youyang blocks are "satisfactory" but the Chengkou Block exhibits both underwhelming terrain and resource levels, the expert said.

Despite containing more than one-quarter of China's geological shale gas resources, MLR officials have declined to tender any blocks in Sichuan Province in the auction. The expert explained that China's three state-owned majors have carved up the Sichuan Basin, registering all blocks between them.

Four of China's most prospective blocks in the Sichuan Basin - the Nanchuan Block in Chongqing, Suiyang and Fenggang Blocks in Guizhou Province, and the Xiushan Block which straddles Chongqing, Guizhou and northwest Hunan Province - went under the hammer in June 2011.

Despite the favorable locations, the auction failed to secure enough bids for two of the blocks, and only the Nanchuan and Xiushan blocks were successfully auctioned. While China Petrochemical Corp. and Henan Provincial Coal Seam Gas Development and Utilization Co. won the rights to the Nanchuan and Xiushuan blocks, bids from PetroChina Co. Ltd. and China National Offshore Oil Corp. were unsuccessful.

More than three-quarters of China's shale gas reserves lie in acreage already owned by the big three state-owned majors, according to MLR data.

The MLR may announce the results of the tender before the end of this year, the source with the ministry said, adding that a timetable for a third round of auctions has not been set yet. The ministry has the right to withdraw blocks from successful bidders if they do not initiate exploration and development within six months, he noted.